The University of Washington’s Board of Regents approved Thursday a complex and historic deal with Seattle developer Wright Runstad to transform the Rainier Square block into one of the city’s tallest skyscrapers.

For the university, the deal could mean earning more money from a prize slice ofthe Metropolitan Tract, downtown land it has owned for more than a century. For downtown, it could mean new vigor for a block where few people now shop at a low-slung retail mall.

Under an 80-year ground lease, Wright Runstad will develop and manage a 50-story tower that will house 750,000 square feet of offices, at least 182 apartments, and 30,000 square feet of ground-floor retail. The developer also will develop and manage a 15-story luxury hotel with 198 rooms.

The 1.15 million-square-foot complex would replace Rainier Square, the retail mall that takes up most of the block between Fourth and Fifth avenues and Union and University streets. The mall and adjacent Rainier Tower, notable for its tapering pedestal, were built in 1978.

Wright Runstad hopes to begin construction on the $500 million-plus project as early as the second half of next year, but the university’s deadline is 2021.

“We think it captures the spirit of the Northwest as one of the regions where new things happen, where exciting buildings come along every few decades,” said Greg Johnson, president of Wright Runstad.

The long-established firm
also developed Wells Fargo Center, 1201 Third Avenue and Second & Seneca, among other downtown office towers.

According to a university memo, the 50-story tower would rise to 795 feet, making it taller than all but one Seattle skyscraper — Columbia Center, at 937 feet — based on data from building-research firm Emporis.

UW Regent Herb Simon expressed grand hopes for the project.

“Rainier Square used to be the 50-yard line of downtown Seattle,” said Simon, who was on speakerphone in Thursday’s meeting. This “will make it the 50-yard line again.”

The regents’ decision begins a new chapter in the history of the 10.7-acre Metropolitan Tract, the university’s original campus before it moved in 1895 to its current site.

While the university still owns the tract, for the past 60 years
most of it has been under a long-term ground lease to Seattle-based Unico Properties. That lease ends Oct. 31.

Unico has a separate lease for the Tract’s Cobb Building through 2050, which the university plans to terminate on Oct. 31 as well.

University officials have made no secret of their dissatisfaction with the expiring ground leases, which required the university to invest in capital improvements.

“A lot of us literally for decades have looked at our properties in downtown and wished they could be far more productive than they have been, from an economic perspective,” said UW Regents Board Chairman Orin Smith during a finance-committee meeting Thursday morning. “This is a great improvement in the productivity of those properties.”

The UW receives about $1.5 million annually from the Rainier Square portion of the Tract. Once the new structures are built and leased up, the university expects to receive $4 million annually.

Calling the agreement “an excellent deal for the university,” UW Chief Real Estate Officer Todd Timberlake told the finance committee the university would have no investment obligations, no construction risk, no lease-up risk and no financing risk.

“When you’re in the core of the core of downtown, creating a great mix of uses is the most important goal,” he said, “and it sounds like that’s what they’re doing.”

Rainier Tower

Architecture firm NBBJ and Wright Runstad worked on a design for the proposed tower and hotel that would maximize the block’s development potential without diminishing views of, and from, Rainier Tower.

“That building is known worldwide,” said Johnson.

Rainier Tower, designed by architect Minoru Yamasaki — a Seattle-area native and UW graduate best known for designing New York’s World Trade Center — gained icon status for its blocky mass atop a curving tapered pedestal.

Groundbreaking on 5th and Columbia, a 43-story office and luxury-hotel tower, hasn’t begun yet even though the project has secured its permits and financing, said developer Kevin Daniels.

“It’s too big of a financial investment without being confident that there’s going to be the tenants and employment to fill your building,” he said. “I’m confident it’s coming and coming soon.”

The key signal Daniels is looking for is evidence that “anyone other than Amazon is starting to grow” and needs more space in the central business district.

At the end of March, the vacancy rate for premium office space was about 10 percent, according to commercial real-estate brokerage Jones Lang LaSalle.

Johnson said he is confident Wright Runstad’s downtown project will be successful in attracting one or two big investors because of strong demand for premium office space, hotel rooms, apartments and signature retail space.

“To date, there hasn’t been a project proposed in Seattle that combines all of these elements, let alone one in such a pre-eminent location,” he said.

Wright Runstad expects technology firms will be interested in leasing the centrally located space as a way to recruit top talent, just as Amazon.com is building its own high-rise campus in Denny Triangle.

A big tenant could put its name on the tower, which doesn’t have a name yet, Johnson said.

With the regents’ blessing, the UW and the developer now begin a 60-day due-diligence period.

After that, Wright Runstad will deposit $2.5 million with the university while it tries to obtain a master permit for the project. If the developer doesn’t get its permit within the first three years, it forfeits all or part of the deposit, according to a university memo.

Wright Runstad will manage Rainier Square and Rainier Tower during the agreement.

Once the developer obtains its permit and financing, the 80-year ground leases — one on the future tower site, the other on the hotel site — would begin.

At the end of the 80-year period, the tower and hotel would be owned by the university.

As for the rest of Metropolitan Tract, the university has set a deadline of next Friday for proposals from firms to manage and provide leasing services for the other buildings.

Those are The Financial Center, a 28-story office building; the Skinner Building, whose tenants include the 5th Avenue Theatre and Brooks Brothers; the 20-story IBM Building; Puget Sound Plaza; The Cobb Building, redeveloped in 2006 into high-end apartments; and the 1,063 parking stalls in the Tract.

While the university will soon consolidate control over much of the Metropolitan Tract, a ground lease on the Fairmont Olympic Hotel only expires in 2040.